Brexit Factor

UK & Europe

The general election, far from providing much-needed clarity on what the UK’s future relationship with the EU will look like, has added to the uncertainty. Many within the EU are still hoping that the UK will change its mind about a hard Brexit and they believe we are more likely to do that if the deal is highly detrimental. With the election resulting in a hung Parliament, our negotiating hand is weakened and a soft Brexit now looks more likely. A very different prospect from leaving the single market, which seemed so likely only weeks ago.

Since the referendum result last June, we have received enquiries from British contractors working in the EU concerned about their status. For many British contractors the opportunity to work in many different countries is a major part of the appeal of freelancing. For the time being it will be business as usual but as the March 2019 leaving date closes in, end users in EU countries will begin to take stock of their contractor resources, and weigh up the benefits of using British contractors versus other EU nationals.

Whatever the outcome of the negotiations between the UK and the EU, Brexit won’t mean the end of contracting opportunities in the EU. Much will depend on what sort of trade deal is agreed, and how freedom of movement is interwoven with that, if at all. Concrete details are scarce at present, but Prime Minister Theresa May’s letter to Donald Tusk does give a few high level clues as to what the UK’s future relationship with the EU will look like. Interestingly, the letter stresses the need for liberal, democratic values, so Brexit may not mean an outright rejection of globalisation, and a retreat from the world, as some have suggested. In fact, Boris Johnson recently suggested that freedom of movement might continue beyond the March 2019 cut-off date.

Be that as it may, it seems highly unlikely that we won’t see an end to open borders at some point. So, what kind of immigration system will the UK have, and to what extent will EU states reciprocate? Theresa May has talked about the UK and the EU remaining ‘committed partners’ and the UK being ‘your closest friend and neighbour.’ This suggests that the UK’s relationship with the EU won’t be equivalent to most other non-EU countries, and that while we won’t be fully integrated into the EU’s freedom of movement rules (unlike Norway and Switzerland) there might be some kind of halfway house arrangement.

The KMR

One option for the UK would be to introduce an immigration system like the KMR in the Netherlands. The KMR is the fastest and most flexible immigration regime in the EU and is a model we should look closely at. Such a system, if reciprocated by the EU (and it would likely have to be symmetrical) would allow the UK government some measure of control but not be a significant bureaucratic impediment to highly skilled contractors in areas such as IT, engineering and financial services operating relatively freely across Europe. What it probably would do is restrict the flow of unskilled migration, which has been so politically contentious. The current points-based immigration system, which the UK applies to non-EU migrants is another alternative. Hirers have to try to fill vacancies from the local labour market before applying for work permits, but if occupations are listed on the Shortage Occupation List, the resident labour market test does not apply. There are a number of IT occupations on the list at present, including data scientists and cyber-security specialists and it is quite likely that the number will increase as the flow of talent from the EU pipeline is restricted.

The problem with the current system is that it is restrictive and bureaucratic. Hirers must register as sponsors first and there is now a fee, known as the Immigration Skills Charge, which means that sponsors must pay up to £1,000 every 12 months per non-EU worker. It’s a system which makes it prohibitively costly for SMEs to recruit from abroad. A more flexible alternative would see the abolition of the requirement for sponsors to advertise vacancies in the UK first, regardless of whether they are on the Shortage Occupation List. Instead, the Home Office could significantly increase the minimum salary threshold so that the system is skewed towards highly skilled workers but flexible enough so as not to hamper business growth. It seems likely that the EU would respond with reciprocal arrangements, and such a system, while being at odds with the principles of the single market, would at least help with negotiations.

Whatever the arrangements, UK contractors will likely be at some disadvantage compared with other EU workers when trying to secure work in the EU. There may be some compensatory factors, however. The devaluation of the pound triggered by Brexit is mostly here to stay, according to many economists. This will make the UK and British workers relatively more attractive to foreign businesses. Tech companies certainly haven’t taken fright at Brexit. Snapchat recently announced that London would be the home for its international headquarters, following announcements by Google, Amazon and Facebook that they would increase their investment in the UK. British contractors with the right skills are increasingly good value for money in EU countries, and if a flexible migration system emerges from Brexit, which recognises the importance of highly skilled workers to economic prosperity, there is every reason to think that British contractors will find many opportunities in the EU in the years ahead.